Anybody trading LEAP options?

Discussion in 'Options' started by short&naked, Jan 26, 2009.

  1. Could somebody who trades LEAP options give some hints?
    What are the pitfalls you came across.
    How is it different from trading shorter term options?
    What broker would you recommend for this?
  2. Try posting in the options forum...

    No specific broker needed, if they are good with options (i.e. TOS) then you should be fine with leaps. Liquidity is going to drop and spreads will get wider out when you go out further.
  3. RobtF


    One strategy is to buy a far out in time LEAP and sell a succession of higher strike, earlier expiration LEAPS against it.
  4. MTE


    The difference between LEAPS and shorter term options that LEAPS are a lot more sensitive to changes in implied volatility and interest rates (Rho becomes an important Greek to watch).
  5. drcha


    Do you have access to an option calculator? Put some LEAPS in and change the implied volatility. You will see how extremely sensitive they are to this factor. You will want to get this to work in your favor Generally, one wants to buy them when IV is low/rising and sell them when it is high/falling. These are not trading instruments; the bid-ask spread is quite high on all but the largest and most liquid underlying issues/indexes. So they are most suitable for a trade that you want to be in for weeks, months, or years.

  6. LEAPS give you more time to be wrong :)
  7. I write leaps. I have a limit order now to buy a bunch of leaps to close (79% gain) :)
  8. ganesh6



  9. Those MM's are idiots. I am 1 penny away from their ask, take it or leave it. the other guys are offering a penny less.

    I refuse to budge. Better that penny today because tomorrow I will bid a penny lower.

    bird in hand worth two in the bush.

    Gonna go watch Judge Judy.
  10. zdreg


    are you in the insurance business? how do u hedge your risks?
    #10     Jan 27, 2009